Financial crime in France: overview

Q&A guide to financial and business crime in France.

The Q&A gives a high level overview of matters relating to corporate fraud, bribery and corruption, insider dealing and market abuse, money laundering and terrorist financing, financial record keeping, due diligence, corporate liability, immunity and leniency, and whistleblowing.

To compare answers across multiple jurisdictions, visit the Financial and Business Crime Country Q&A tool.

This Q&A is part of the global guide to financial and business crime. For a full list of jurisdictional Q&As visit www.practicallaw.com/financialcrime-guide.

Contents

Fraud

Regulatory provisions and authorities

1. What are the main regulatory provisions and legislation relevant to corporate or business fraud?

"Fraud" is not a separately defined crime under French law, and there is no exact equivalent of the "mail fraud" and "wire fraud" provisions of the US Criminal Code (sections 1341 and 1343, L8 USC). Rather, fraudulent conduct can be an element of various criminal provisions arising under the Criminal Code (Code Pénal). For the French text of the Criminal Code and an English version of the text, see Online resources.

 

Offences

2. What are the specific offences relevant to corporate or business fraud?

The following are the offences most likely to be applicable to business or corporate fraud. The list does not address, for example, criminal offences such as common "theft".

  • Swindling (escroquerie). Swindling consists of depriving a physical person or a company of money or a thing of value, or of services, or inducing the discharge of a debt by trickery, including by use of a false name, identity or pretences (Article 313-1, Criminal Code).

  • Breach of trust (abus de confiance). Breach of trust consists of the misappropriation of funds or property that were received on the understanding that they would be handled in a certain way (Article 314-1, Criminal Code).

  • Taking advantage (abus de faiblesse). Taking advantage means causing a victim to act, or abstain from acting, in a way that causes them injury, by taking advantage of a state of ignorance, weakness or vulnerability, including the use of psychological pressure (Article 223-15-2, Criminal Code).

  • Extortion (extorsion). Extortion consists of obtaining anything of value (information, funds, signatures and so on) by violence or the threat of violence (Article 312-1, Criminal Code).

  • Bankruptcy fraud (organisation frauduleuse de son insolvabilité). This is the misstatement by a debtor of his financial position in the context of a bankruptcy (Article 314-7, Criminal Code).

  • Money laundering (blanchiment). This consists of fraudulently hiding the origin or nature of funds or property (Article 324-1, Criminal Code) (see Question 19).

  • Falsification (faux). This is the fraudulent alteration of the veracity of a document or other medium that creates a right or obligation (Article 441-1, Criminal Code).

  • Tax fraud (fraude fiscale). This is tax evasion, including a material element (taking or attempting to take steps designed to minimise taxes) and an element of intention (knowledge that the tax is due) (Article 1741, General Tax Code (Code Général des Impôts)).

  • Misuse of corporate funds (abus de biens sociaux). This applies to corporate managers who directly or indirectly use corporate property for personal ends (Articles L241-3 and L242-6, Commercial Code (Code de Commerce)).

  • Consumer fraud (tromperie). This is deceiving a purchaser as to the nature, quality, quantity or appropriateness of merchandise (Article L213-1, Consumer Code (Code de la Consommation)).

 

Enforcement

3. Which authorities have the powers of prosecution, investigation and enforcement in cases of corporate or business fraud? What are these powers and what are the consequences of non-compliance?

Authorities

Violations of the Criminal Code are generally pursued by the Public Prosecutor with an Investigating Magistrate (Juge d'Instruction) in case of complex violations.

In December 2013, the laws for tax fraud and financial crimes were reformed, and a new prosecutorial office for financial matters was created (Parquet National Financier). This prosecutorial office aims to take the lead in market abuse violations, such as insider trading, and for complex financial crimes, including those where the victims are "geographically dispersed", for example, in international fraud cases.

The French Financial Markets Authority (Autorité des Marchés Financiers) (AMF) conducts the administrative enforcement of provisions relating to securities and other financial transactions. The Prudential Control and Resolution Authority (Autorité de Contrôle Prudentiel et de Résolution) (ACPR) has responsibility over regulations relating to the banking and insurance sectors.

For more information on the Public Prosecutor, the Investigating Magistrate, the AMF and the ACPR, see box: The authorities.

The Public Prosecutor, working with police agencies (including those with special expertise), investigates criminal activity arising under the criminal code and other criminal laws. On completion of an investigation, a matter deemed to be supported by evidence will be referred to trial, generally before the High Court (Tribunal de Grande Instance) for a trial without a jury. In unusually complex or large cases, the Public Prosecutor may refer the matter to an Investigating Magistrate who then conducts an investigation and decides whether to refer the matter to trial. Under some circumstances, victims can apply to an investigating magistrate for a criminal investigation, and may participate in it (and in a trial) as "civil parties" (parties civiles). Under certain circumstances, a non-governmental organisation with a pre-existing demonstrable interest in the subject matter may also be considered a civil party to a criminal investigation. The procedures governing such investigations and trials are found in the French Code of Criminal Procedure (Code de Procédure Pénale). For the French and English text of the Code of Criminal Procedure, see Online resources.

Although French law does not provide a specific requirement that either a corporation or its officers must report criminal activity of which they have knowledge, auditors face criminal penalties if they fail to report such information. Any French public servant must report a first or second level infraction (a crime or a délit) to the Public Prosecutor's office (Article 40, Code of Criminal Procedure).

Both the Public Prosecutor, who works in conjunction with the police, and the Investigating Magistrate have a full range of investigative powers ( see box: The authorities).

These powers include the ability to carry out the following:

  • Obtain wiretaps.

  • Conduct dawn raids on premises.

  • Summon witnesses for questioning under a procedure known as garde à vue, where a witness can be held for a period of 24 hours for questioning, during which the witness has the right to the presence of an attorney. The 24 hour period may be renewed by application to a judge.

Non-compliance with investigative demands can lead to several consequences. For a police investigation or a criminal investigation led by an Investigating Magistrate, non-compliance with a specific order can result in immediate arrest and other criminal consequences (see Question 4). Other regulators that require either systematic reporting or conduct their own investigations have their own rules relating to non-compliance, which will vary according to the severity of the conduct and whether or not the conduct was intentional.

Protections available

The French near equivalent to the attorney-client privilege (le secret professionnel) protects all communications between lawyers and their clients from being disclosed. A lawyer must not violate the privilege even if the client provides his permission. If a lawyer violates the privilege, he may be subject to criminal and professional sanctions. The privilege therefore provides significant protection to individuals under investigation.

 

Penalties

4. What are the potential penalties or liabilities for participating in corporate or business fraud?

Civil/administrative proceedings or penalties

The Prudential Control and Resolution Authority and the Financial Markets Authority can impose fines on liable parties. The maximum fine that may be imposed for market abuse violations by the Financial Markets Authority is EUR100 million or ten times the amount of the profit realised. The maximum fine that may be imposed by the Prudential Control and Resolution Authority is EUR100 million.

Criminal proceedings

Penalties.The maximum sentences permitted under the penal statutes are:

  • Swindling. Five years' prison and/or a EUR375,000 fine.

  • Breach of trust. Three years' prison and/or a EUR375,000 fine.

  • Taking advantage. Three years' prison and/or a EUR375,000 fine.

  • Extortion. Seven years' prison and/or a EUR100,000 fine.

  • Bankruptcy fraud. Three years' prison and/or a EUR45,000 fine.

  • Money laundering. Five years' prison and/or a EUR375,000 fine.

  • Falsification. Three years' prison and/or a EUR45,000 fine.

  • Tax fraud. Five years' prison and/or a EUR500,000 fine.

  • Misuse of corporate funds. Five years' prison and/or a EUR375,000 fine.

  • Consumer fraud. Two years' prison and/or a EUR300,000 fine.

Judges have discretion to impose sentences up to the maximum amount. Under certain circumstances, such as recidivism or aggravating elements (such as taking advantage of a minor) enhanced sanctions may be applicable.

The principal sanction incurred by corporate entities is a fine (Articles 131-37 to 131-49, Criminal Code). The maximum amount of a fine is five times that which is applicable to natural persons. When the law makes no provision for a fine to be paid by a natural person, the fine incurred by a corporate entity is EUR1 million.

Corporate entities can also be punished by one or more of the following penalties:

  • Dissolution, where the legal person was created to commit a first-level crime (punishable by more than ten years' imprisonment for individuals) or where it was diverted from its objects to commit a crime that carries a sentence of imprisonment of three years or more.

  • Prohibition from exercising, directly or indirectly, one or more social or professional activities, either permanently or for a maximum of five years.

  • Placement under judicial supervision for a maximum of five years.

  • Permanent closure or closure for up to five years of one or more of the company's establishments that was used to commit the offences in question.

  • Disqualification from public tenders, either permanently or for a maximum of five years.

  • Prohibition from making a public appeal for funds, either permanently or for a maximum of five years.

  • Prohibition from drawing cheques (except those allowing the withdrawal of funds by the drawer from the drawee, or certified cheques) and prohibition from using payment cards, for a maximum of five years.

  • Confiscation of property that was used or intended for the commission of the offence, or of resulting property.

  • Posting a public notice of a decision or disseminating a decision in the written press or using any form of communication to the public by electronic means.

Right to bail. An individual who is under formal investigation for an infraction that carries a penalty of imprisonment may be placed under judicial control based on an order of an investigating magistrate or a judge who is specially designated to rule on questions of liberty and detention. The provision of a bond as a security may be ordered under Article 138, paragraph 11 of the French Code of Criminal Procedure. Providing a bond is not analogous to posting bail and it is only one of several measures, including measures that would restrict liberty, with which an individual under formal investigation may be ordered to comply. The bond can be used to secure the appearance or the representation of an individual before the court or the reparation or of damage caused by the infraction. Under extreme circumstances, generally involving a risk of flight, a person under investigation may be detained.

Civil suits

Civil parties (see Question 3), can participate as parties in a criminal proceeding through trial (and appeal) and be awarded damages by the same court that decides on the issue of guilt. In the absence of such a proceeding, victims can commence a civil suit. Their damages are generally limited to actual losses and to lost opportunities (perte de chance). The court may also impose general damages not linked to a specific loss, called "moral damages" (préjudice moral) to compensate the victim for mental anguish or distress.

There are no procedures for class actions. In some limited circumstances, a "foundation" or other group may be established to seek compensation for its participants, generally in the area of consumer injuries.

On 17 March 2014, French law introduced an opt-in system class action proceeding available for individual consumers. This applies only to consumer and competition law violations. Consumers can only bring the class action through a consumer association registered under French law and they may only seek remedies for the material loss they have suffered (damages for physical or moral loss may be recovered only through individual lawsuits).

 

Bribery and corruption

Regulatory provisions and authorities

5. What are the main regulatory provisions and legislation relevant to bribery and corruption?

The Public Prosecutor is generally responsible for investigating criminal offences, but in complex cases of bribery and corruption an Investigating Magistrate is usually appointed.

Passive and active corruption is unlawful under French law. Passive corruption occurs when a domestic or foreign public official or private actor unlawfully solicits a bribe either directly or indirectly. Active corruption occurs when another person either directly or indirectly unlawfully induces, or attempts to induce, a domestic or foreign public official or private actor to accept a bribe (Articles 433-1, 433-2, and 433-3, Criminal Code).

French public prosecutors do not often attempt to prosecute overseas companies for corruption and, when they do attempt such prosecution, they are not often successful. Prior to this year, the French public prosecutor counted only one victory in prosecuting overseas corruption, a conviction of Safran S.A. for corruption. In January 2015, the Court of Appeal of Paris overturned the company's conviction (Dossier No. 12/08695, Cour d’Appel, Paris, Chambre 13 (7 January 2015)). In July 2015, a Paris first instance criminal court acquitted Total S.A. of corruption charges for allegedly having circumvented UN sanctions against Iraq. A 2012 report of the OECD criticised France for its relatively lax enforcement record of its legislation implementing the OECD Convention on Combatting Bribery of Foreign Officials in International Business Transactions.

For more information on the Public Prosecutor and Investigating Magistrate, see box: The authorities.

 
6. What international anti-corruption conventions apply in your jurisdiction?

France is a party to two international anti-corruption conventions:

  • OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions 1997.

  • UN Convention Against Corruption 2003, ratified in France in 2005.

France is also a party to two Council of Europe Corruption Conventions:

  • Civil Law Convention on Corruption 1999, ratified in France in 2008.

  • Criminal Law Convention on Corruption 1999, ratified in France in 2008.

France is a party to the Convention on the fight against corruption involving officials of the European Communities or officials of member states of the EU, which entered into force on 28 September 2005. France implemented the Convention in Articles 435-1 through 435-4 of the Criminal Code.

France has also adopted Council Framework Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private sector (Article 445-1, Criminal Code).

 

Offences

7. What are the specific bribery and corruption offences in your jurisdiction?

Foreign public officials

Passive and active corruption of foreign public officials are criminal offences (Articles 435-1 and 435-3, Criminal Code). A foreign public official is defined as an officer or employee of a foreign government or international organisation.

Active and passive corruption of international judicial personnel is also unlawful (Articles 435-7 and 435-9, Criminal Code).

Domestic public officials

The core offence of bribery is defined as proffering unlawfully, at any time, directly or indirectly, any offer, promise donation, gift or reward, to induce a person holding public authority, discharging a public service mission, or vested with a public electoral mandate to either (Article 433-1, Criminal Code):

  • Carry out or abstain from carrying out an act pertaining to his office, duty or mandate, or facilitated by his office duty or mandate.

  • Abuse his real or alleged influence with a view to obtaining distinctions, employment, contracts or any other favourable decision from a public authority or the government.

It is also an offence for such a person to, directly or indirectly, solicit such offers, promises, donations, gifts or rewards.

Private commercial bribery

Active and passive bribery of a private person to abuse a contractual relationship or relationship of trust is punishable by five years' imprisonment and a fine of up to EUR500,000 (Articles 445-1 and 445-2, Criminal Code).

Intent

Article 121-3 of the Criminal Code requires intent as a basis for criminal conviction. It also contains provisions for the level or specificity of the intent required in a particular case to increase the maximum penalty.

Defences

8. What defences, safe harbours or exemptions are available and who can qualify?

Facilitation payments are illegal. There are no safe harbours or exemptions. A defence can be raised based on absence of intent or the failure to establish the material elements of a corruption offence. Another defence, available to corporations, is to argue that the acts were not committed by an "organ or representative" capable of binding the corporation (Article 12-2, Criminal Code).

 
9. Can associated persons (such as spouses) and agents be liable for these offences and in what circumstances?

Associated persons and agents are not liable as such for corruption. However, French law does recognise the principle of "aiding and abetting" (complicité), by which an agent who directs or helps a principal in accomplishing a criminal act may also be liable for it (Articles 121-6 and 121-7, Criminal Code).

 

Enforcement

10. Which authorities have the powers of prosecution, investigation and enforcement in cases of bribery and corruption? What are these powers and what are the consequences of non-compliance?

Authorities

The Public Prosecutor is generally responsible for investigating criminal offences, but in complex cases of bribery and corruption an Investigating Magistrate is usually appointed.

For more information on the Public Prosecutor and Investigating Magistrate, see box: The authorities.

French courts may exercise extra-territorial jurisdiction over offences committed outside French territory only under the circumstances set out in the Criminal Code. An offence is considered to be committed on French territory if one of its constituting elements took place there (Article 113-2, Criminal Code). French criminal law also recognises the extra-territorial application of its criminal laws to acts committed outside of France by French nationals (including French corporations) and for acts where a French citizen is a victim.

The Public Prosecutor oversees preliminary investigations by the criminal police, which often take years to complete. International investigations are often especially long, particularly as most of them are conducted by investigating magistrates who are highly professional but understaffed.

To comply with the OECD Bribery Convention, French legislation criminalises acts of official corruption by French nationals, wherever these acts take place.

Following a preliminary police investigation, the Public Prosecutor determines the scope of the Investigating Magistrate's treatment of the case. If the alleged offence was entirely or partly on French territory, the victims (civil parties) can also initiate the magistrate's investigation.

If the Investigating Magistrate decides there are important and consistent indications of culpability of a particular legal person (including a company or other entity), that person or entity is put under formal investigation (mise en examen). At that point, the party has a right to engage in all of the following actions:

  • Accessing the file compiled by the Investigating Magistrate.

  • Filing formal demands with the Investigating Magistrate. The party can, for example, request the appointment of an expert to give an opinion on a particular issue, or the exploration of further aspects of the case.

  • Submitting observations relevant to the Investigating Magistrate's ultimate decision on whether to turn the case over to the court.

After the completion of the Investigating Magistrate's investigation of the case, the Public Prosecutor issues a non-binding order that either there is no sustainable case and, as a result, the charges should be dropped or that the case should be turned over to the court for trial. The Investigating Magistrate must then give his final closing order and has the discretion to either drop some or all of the charges or to turn the case over for trial.

The parties can, through a written and reasoned request, ask the investigating magistrate to make a decision to, for example:

  • Proceed with a hearing or an interview.

  • Interview a witness.

  • Order the production of a document or exhibit.

  • Order any other acts that are necessary to establish the truth.

If the investigating magistrate does not grant a party’s request, a decision to that effect will be issued, at the latest one month after the request is received. If the individual who makes such a written request is the individual under formal investigation, following the expiration of four months from the time of that individual's last appearance, he must be heard by the investigating magistrate. The investigating magistrate must proceed with an interview of the individual under formal investigation within 30 days of the receipt of a properly made request. (Article 82-1, Criminal Procedure Code).

Compared with the active prosecution of internal corruption cases, instances of the French courts' prosecution of foreign corruption cases have been few and far between. In the 14 years since French law was amended to comply with the Organisation for Economic Co-operation and Development (OECD) treaty, only one corporation has been convicted under those provisions and that conviction was overturned on appeal.

While France has not been active investigating or prosecuting foreign corruption itself, it co-operates with US and other countries' efforts in this area. The Ministry of Justice has an Office for International Co-operation on Criminal Matters (Bureau de l'Entraide Pénale Internationale) which facilitates such co-operation, often under mutual legal assistance treaties (MLATs) or memoranda of understanding (MoUs).

Court orders or injunctions

The public prosecutor can, in his initial submission and at any point during the investigating magistrate's procedure, ask that the investigating magistrate undertake all acts that are necessary to understand the truth, including any measures that are necessary to provide a security (Article 82, Criminal Procedure Code).

Protections available

Individuals and companies who are under investigation for corruption benefit from the protection offered by the French equivalent of the attorney-client privilege (see Question 3).

 

Penalties

11. What are the potential penalties for participating in bribery and corruption?

Civil/administrative proceedings or penalties

Bribery is a criminal offence and civil and administrative sanctions do not apply.

Criminal proceedings or penalties

Criminal proceedings

An individual under formal investigation for corruption may be subject to measures that could restrict his liberty and may be ordered to pay a bond to guarantee his appearance in court or to secure the reparation of damages caused by the alleged crime (Article 138, paragraph 11 of the Criminal Procedure Code, see Question 4 ).

Penalties. Individuals and corporate entities that are convicted for active corruption of public officials may be subject to the following penalties:

  • Individuals: ten years' imprisonment and a fine up to EUR1 million or double the amount gained.

  • Corporate entities: a fine up to EUR5 million.

Public officials convicted for passive corruption are subject to ten years' imprisonment and a fine up to EUR1 million.

 

Tax treatment

12. Are there any circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible as a business expense?

Bribes, ransoms or payments arising from blackmail and extortion are not tax-deductible in France.

 

Insider dealing and market abuse

Regulatory provisions and authorities

13. What are the main regulatory provisions and legislation relevant to insider dealing and market abuse?

Market abuses under French law are sanctioned both by criminal law and financial market regulators' regulations. Although it was long possible for a Financial Markets Authority (AMF) investigation that resulted in the acquittal or sanction of an individual, to be followed or conducted in parallel with a criminal prosecution, a decision of the French Constitutional Court (Conseil Constitutionnel) reversed that long standing position of French law (Conseil Constitutionnel, Decision No. 2014-453/454, 18 March 2015).

The Constitutional Court held that the provisions of the French Monetary and Financial Code which had allowed for parallel or successive criminal prosecutions for insider trading following or during an AMF procedure which resulted in acquittal or a sanction, were contrary to the French constitutional principle of the necessity of infractions and sanctions (Article 8, Declaration of the Rights of Man and of the Citizen).

The Constitutional Court abrogated the provisions of the Monetary and Financial Code which allowed for parallel or successive administrative and criminal prosecution of insider trading offences under, respectively, Article L465-1 of the Monetary and Financial Code and Article L621-15 of the Monetary and Financial Code. This will be effective from 1 September 2016. Between March 2015 and 1 September 2016, the French legislature will amend the law on insider trading in order to bring it into conformity with the French constitution.

Until 1 September 2016, interim measures have been put in place to ensure that individuals may only be subject to one type of prosecution, either criminal prosecution by the public prosecutor or administrative prosecution by the AMF.

These interim measures do not apply to regulated professionals that are specified in Article L.621-9 of the Monetary and Financial Code including, for example, authorised investment service providers, who many still be subject to parallel criminal and administrative prosecution. Their administrative prosecution by the AMF, which is subject to appeal in the administrative courts, is considered to be actually administrative. In contrast, AMF procedures against other individuals were held by the Constitutional Court to be judicial in nature because appeals in those cases are handled by the French judicial courts.

Although no official guidelines have yet been adopted with regard to the implementation of this decision, in May 2015, the AMF issued a Proposition of Reform that relates to the application of the principle of non bis in idem in market abuse cases. The AMF recommended that, in light of both the non bis in idem principle and the Constitutional Court's decision, no category of person (including those listed in Article L.621-9 of the Monetary and Financial Code) should be subject to dual-track criminal and administrative prosecution for market abuse offences.

 

Offences

14. What are the specific insider dealing and market abuse offences?

Insider trading

The offence of insider trading is committed when a party deals in securities on the basis of inside information, that is, information that is not publicly known and which would affect the price of the securities if it were made public. The following parties are capable of committing the offence of insider trading:

  • Company executives when, through the practice of their profession or the performance of their functions, they both:

    • obtain inside information concerning the prospects or the situation of an issuer whose securities are qualified for trading on a regulated market or the likely performance of a financial instrument admitted to trading on a regulated market, either directly or through an intermediary; and

    • directly or through an intermediary, carry out or facilitate one or more transactions before the public has knowledge of that inside information.

  • Individuals when, through the practice of their profession or the performance of their functions, both:

    • obtain inside information concerning the prospects or the situation of an issuer whose securities are admitted to trading on a regulated market or the likely performance of a financial instrument admitted to trading on a regulated market; and

    • communicates that inside information to a third party outside the normal framework of his profession or functions.

  • Any other party. An offence is committed by any other person who both:

    • knowingly obtains inside information concerning the situation or prospects of an issuer whose securities are admitted to trading on a regulated market or the likely performance of a financial instrument admitted to trading on a regulated market; and

    • directly or indirectly communicates that inside information, or allows it to be communicated, to a third party before the information becomes public.

Market manipulation and misleading statements

The offence of market manipulation applies to:

  • Whoever carries out or attempts to carry out, directly or through an intermediary, a deliberate act intended to impede the normal operation of a regulated market by misleading others.

  • Whoever publicly disseminates, by whatever means, any false or misleading information concerning the prospects or the situation of an issuer whose securities are traded on a regulated market, or the likely performance of a financial instrument or an asset that is admitted to trading on a regulated market, which might affect its price.

Intent

Awareness of breaking the law is required to establish criminal offences (Article 121-3, Criminal Code).

Attempt

Certain criminal attempts are punishable if the law criminalising the conduct so specifies (Article 121-4, Criminal Code). A recently enacted law (Law No. 2013-672 of 26 July 2013) provides that attempts of insider trading, market manipulation and misleading statements are punishable.

Financial Markets Authority (AMF) regulations

The Sixth Part of the General Regulation of the AMF provides rules that prohibit market abuses. The criteria used to define these offences are quite similar, although there is no requirement for the perpetrator to be aware of breaking the law to be liable.

 

Defences

15. What defences, safe harbours or exemptions are available and who can qualify?

The law does not provide specific exemptions in relation to the criminal offences of insider dealing and market abuse.

The principal available defences are:

  • Contesting the materiality of the offence and the reality of the facts.

  • Showing that it was impossible to act otherwise.

  • Showing an absence of knowledge or intent.

  • For a corporation, showing that the relevant acts were not committed by an organ or representative with a standing capable of binding the corporation under Article 121-2 of the Criminal Code.

 

Enforcement

16. Which authorities have the powers of prosecution, investigation and enforcement in cases of insider dealing and market abuse? What are these powers and what are the consequences of non-compliance?

Authorities

The Financial Markets Authority (AMF) is the responsible investigating authority when a company or an individual has breached rules contained in the Sixth Part of the General Regulation of the AMF (Règlement General de l'AMF).

The Public Prosecutor is the principal authority responsible for investigating insider dealing and market abuse resulting from breaches of the Monetary and Financial Code (Code monétaire et financier) (CMF).

From 2014, the new prosecutorial office for financial matters (Parquet National Financier) has exclusive jurisdiction over the investigation of insider dealing. However, for complex cases, the investigating magistrate may also be involved in the investigation.

In March 2014, the European Court of Human Rights ruled that the parallel proceedings (administrative and criminal) existing in Italy for market abuses violate the principle of double jeopardy (ECHR, 4 March 2014, Grande Stevens and Others v Italy).

In the Constitutional Court's decision of March 2015 (Conseil Constitutionnel, Decision No. 2014-453/454, 18 March 2015) on constitutional questions that were posed during the criminal phase in two separate insider trading cases, it was held that the provisions of the Monetary and Financial Code that had allowed for the dual-track criminal and administrative prosecution of insider trading offences violated the French constitution.

The Grande Stevens and Others v. Italy decision and its analogous holding with regard to the Italian system on the basis of the non bis in idem principle was important to the insider trading defendants' arguments that achieved the transmission of their constitutional questions to the Constitutional Court via a Paris first instance court and the French Supreme Court (Cour de Cassation). However, the Constitutional Court's opinion did not cite the decision as a basis of support for its reasoning. For more information on this decision, see Question 13.

For more information on the AMF and the Public Prosecutor, see box: The authorities.

The Financial Markets Authority (AMF) is the financial market regulator and has investigative powers. These powers rely on co-operation by individuals concerned with an investigation and the AMF must obtain court orders to seize documents, force individuals to attend interviews and so on.

The Public Prosecutor has no special powers that are granted in relation to insider dealing and market abuse (for general powers, see Question 3). An Investigating Magistrate may also be involved in complex cases. See box: The authorities.

Powers of interview

The AMF can, without judicial authorisation, require the communication of documents, including data held by telecommunication operators. It can also require the appearance of any person who could provide information, may appear in a professional location and require the handing over of documents, correspondence (including e-mail correspondence) or make copies of any such material, including copies of audio portions of documents. The AMF can also order the conservation of this information (Article L621-10, Monetary and Financial Code).

When the AMF is investigating facts that are susceptible to be qualified as a second level infraction related to market abuses, the Secretary General of the AMF can request the authorisation of a judge of liberty and detention of the first instance Paris court to undertake searches and seizures in any location and collection of documents and may request immediate explanations from individuals during the search.

Court orders or injunctions

The AMF corporate group can compel any person to bring an end to a behaviour which could constitute a threat to the protection of investors or to the good functioning of the market (Article L621-14(I), Monetary and Financial Code).

The President of the AMF may, in order to put an end to irregular practices and remove their effects, ask the President of the Paris first instance court through the use of a procedure reserved for urgent matters to enjoin any person from perpetuating a practice that is contrary to European regulations or to legislative or regulatory dispositions (Article L621-14(II), Monetary and Financial Code).

Protections available

AMF investigators can access information that is usually covered by professional secret rules and turn over such material that constitutes the second level infraction of creating an obstacle to an AMF investigation (see Article 642-2, Monetary and Financial Code). An exception to this rule is that the professional obligation to maintain client confidentiality continues to apply throughout an AMF investigation. Therefore, communications between attorneys and their clients may not be seized by the AMF and a lawyer may not waive the privilege. The AMF may obtain information covered by the French equivalent of the attorney-client privilege only if the client independently decides to provide the privileged communication without the intervention of his or her lawyer in the communication (Article 621-9-3, Monetary and Financial Code).

 

Penalties

17. What are the potential penalties for participating in insider dealing and market abuse?

Civil/administrative proceedings or penalties

The Financial Markets Authority (AMF) can impose administrative sanctions for insider trading and market manipulation under Article L621-15 of the Monetary and Financial Code. The board of the AMF acts as the investigating and prosecuting authority, and the sanctions commission, which is composed of independent members, is the judgment authority (Article L621-2, Monetary and Financial Code). The board of the AMF conducts an investigation, following which it may decide to open a sanctions procedure before the sanctions commission. The administrative penalties imposed by the AMF sanctions commission can be disciplinary or pecuniary and can reach EUR100 million or ten times the amount of the profit.

A decision by the AMF sanctions commission may be reviewed by the Paris Court of Appeals or the Conseil d'Etat, which reviews the factual findings and the legal reasoning of the AMF sanction commission. In the limited category of cases in which dual-track prosecution of criminal and administrative offences is still technically possible following the Constitutional Court's decision of 18 March 2015(see Question 13), if the AMF sanctions commission imposes an administrative fine before a criminal fine is imposed, a criminal judge can order that the criminal fine be offset by the administrative one (Article L621-16, Monetary and Financial Code).

The Secretary General of the AMF can, in a non-adversarial procedure, ask the President of the Paris first instance court to sequester funds, things of value, and rights or titles of individuals who are under investigation by the AMF. In an urgent and adversarial procedure, the President of the Paris first instance court canorder the deposit of a sum of money as a security (Article 621-13, Monetary and Financial Code).

Criminal proceedings

Requirement to pay a bond. An individual under formal investigation for insider dealing may be subject to measures that could restrict his liberty and may be ordered to pay a bond in order to guarantee his or her appearance in court or to secure the reparation of damages caused by the alleged crime (Article 138, paragraph 11, Criminal Procedure Code)(see Question 4).

Penalties. Any person who commits insider dealing can be sentenced by a criminal court to two years' imprisonment (for individuals) and a EUR1.5 million fine (Article L465-1, Monetary and Financial Code) (a corporation may have a fine imposed). The fine may be increased to up to ten times the amount of the profit of the offence and must never be less than the amount of that profit.

Market manipulation and misleading statements are subject to the same sanctions as insider dealing (Article L465-2, Monetary and Financial Code).

Civil suits

Parties that have suffered damages can seek to participate as "civil parties" before the criminal court (see Question 3).

 

Money laundering, terrorist financing and financial/trade sanctions

Regulatory provisions and authorities

18. What are the main regulatory provisions relevant to money laundering, terrorist financing and/or breach of financial/trade sanctions?

Money laundering

Money laundering and terrorist financing acts are unlawful in France. To reduce the risk of money laundering and terrorist financing activities, mandatory reporting requirements apply to many financial sector professionals.

Terrorist financing

See above, Money laundering.

Financial/trade sanctions

The French Ministry of Foreign Affairs is responsible for French foreign policy, including financial and trade sanctions. The French Ministry of Economics and Finance implements these sanctions. Trade and financial sanctions may be put into place in accordance with UN Security Council Resolutions, which are implemented by EU Regulations. EU Regulations are directly applicable in France. Sanctions can be implemented by decree (Articles L151-1 and L152-2, L562-1 and L562-2, Monetary and Financial Code).

Legislation relating to trade sanctions varies significantly from country to country, and over time as the French government responds to diplomatic and economic international issues. It is therefore necessary to consult with a specialist to determine risks that may be posed by doing business with any particular country at any point in time.

 

Offences

19. What are the specific offences relating to money laundering, terrorist financing and breach of financial/trade sanctions?

Money laundering

The material elements of the offence of money laundering are (Article 324-1, Criminal Code):

  • Facilitating by any means the false justification of the origin of the property or income of a perpetrator of a first or second tier crime ("crime" or "délit") that brings the perpetrator a direct or indirect benefit.

  • Assistance in investing, concealing or converting the direct or indirect products of a felony or misdemeanour.

The reform of financial crime laws in December 2013 added a new provision to the Criminal Code, creating a presumption that the goods or revenue are the direct or indirect product of a crime or misdemeanour when (Article 324-1-1, Criminal Code):

  • Money laundering is alleged, based on the assistance in investing, concealing or converting products of a misdemeanour.

  • The material, judicial or financial conditions of the operation of placement, of dissimulation, or of conversion could not have a justification other than to conceal the origin or the effective beneficiary of the goods or revenues.

    With this reform, the burden of proof is reversed and it is the accused that must prove the legality of the funds or goods in question.

Intent must also be established, which requires proving that the accused acted with the requisite intent to commit the crime (Article 121-3, Criminal Code). Money laundering is not a strict liability offence.

Attempted money laundering is subject to the same penalties as money laundering (Articles 121-5 and 324-6, Criminal Code).

Terrorist financing

Financing a terrorist enterprise by supplying, bringing together or directing funds, value or goods, or in giving counsel to that end, with the intention or understanding that such will be used, fully or in part, to commit one or more acts of terrorism under the Criminal Code, is punishable, independent of the occurrence of an actual terrorist act (Article 421-2-2, Criminal Code).

Financial/trade sanctions

Customs Code offences. Contravention or attempted contravention of the legislation and regulations of foreign financial relations constitutes an offence, which may be established based on the following elements (Article 459, para. 1, Customs Code):

  • Failure to respect obligations of declaration and repatriation.

  • Failure to observe the procedures prescribed or the formalities required.

  • Failure to provide required authorisations or not satisfying the conditions under which the authorisations were made.

The following actions are also offences:

  • Violation or attempted violation of the restrictive measures on economic relations set out by EU Regulations made in application of Article 215 of the Treaty on the Functioning of the European Union (TFEU) or by international treaties and agreements approved and ratified by France (Article 459, para. 1 bis, Customs Code).

  • Incitement by writing, propaganda or publicity to commit one of the offences set out by the Customs Code, whether or not the incitement resulted in the infraction being committed (Article 459, para. 3, Customs Code).

Offences under the Monetary and Financial Code. It is an offence for the following parties to cease to comply with their resulting obligations or to create an obstacle to their implementation:

  • The leaders or employees of a financial organisation.

  • Organisations and institutions referenced by Article 562-3, including a relatively extensive list of professionals and entities which include, for example, legal professionals and certain investment companies.

  • People who are the object of an asset freeze or other restriction made in application of Chapter II of the section of the Monetary and Financial Code that relates to money laundering and financing acts of terrorism (Article 574-3, Monetary and Financial Code).

Participation in a criminal association

Participation in a criminal association or group is a criminal offence (Article 450-1, Criminal Code). A criminal association is defined as any group formed or any conspiracy established with a view to the preparation, marked by one or more material actions, of one or more crimes punishable by more than five years' imprisonment for individuals.

Failure to disclose

The following individuals and organisations that effect, control or counsel on operations resulting in movements of capital must make certain declarations to the Ministry of Economics and Finance service against money laundering (Traitement du renseignement et action contre les circuits financiers clandestins) (TRACFIN) (Article L561-2, Monetary and Financial Code):

  • Banks and credit establishments.

  • Insurance companies.

  • Investment enterprises.

  • Building agents.

  • Casino managers.

  • Auditors and expert accountants.

  • Counsellors in participatory investments.

  • Physical legal persons who provide assistance with operations related to property belonging to other people including contracts relating to the use of buildings.

The circumstances under which declarations must be made include (Article L561-15, Monetary and Financial Code):

  • Operations of which they had knowledge and that concern sums that they know came from offences (such as money laundering) that are punishable by a prison sentence of more than one year, or from participation in terrorist financing.

  • Declarations of sums or operations of which they know, suspect or have reason to suspect came from tax fraud.

For more information on TRACFIN, see box: The authorities.

Protections available

Under strictly defined conditions, when a lawyer suspects that a client's activities are linked to money laundering, the lawyer must make declarations to the President of the Paris bar that will be transmitted to TRACFIN. In these limited circumstances, some of the protections that a client would otherwise benefit from under the French attorney-client privilege (see Question 3) may be derogated from in accordance with the applicable provisions of French law (Article 561-2, Article 561-3, Article 561-15-1, Article 561-17, Monetary and Financial Code).

 

Defences

20. What defences, safe harbours or exemptions are available and who can qualify?

There are no statutory defences to money laundering or terrorist financing other than those based on the failure to establish intent or a material element of the offence.

When professionals fulfil their obligation to report suspicious activities to the Ministry of Economics and Finance service against money laundering (TRACFIN), Article L561-22 of the Monetary and Financial Code provides that they cannot be prosecuted for:

  • Improper disclosure (Article 226-10, Criminal Code).

  • Violation of professional privilege or confidentiality rules (Article 226-13 and Article 226-14, Criminal Code).

There are also no statutory defences to the offences related to contravention or attempted contraventions of the legislation and regulations of foreign financial relations that are described in Question 19.

 

Enforcement

21. Which authorities have the powers of prosecution, investigation and enforcement in cases of money laundering? What are these powers and what are the consequences of non-compliance?

Authorities

Money laundering and terrorist financing. The following French authorities have supervisory authority:

  • Prudential Control and Resolution Authority (Autorité de Contrôle Prudentiel et de Régulation) (ACPR).

  • National Enforcement Commission (Commission Nationale des Sanctions).

The ACPR is responsible for safeguarding the stability of the financial system and for protecting banking and insurance customers, as well as insured members and beneficiaries of the entities subject to its supervision.

The National Enforcement Commission is responsible for monitoring other independent professionals to ensure their compliance with anti-money laundering and anti-terrorist financing obligations, including:

  • Real estate professionals.

  • Casino managers and other groupings, circles and companies concerned with gambling.

  • Persons operating tax-related domiciliation services.

For more information on the ACPR and the National Enforcement Commission, see box: The authorities.

The Ministry of Economics and Finance service against money laundering (Traitement du renseignement et action contre les circuits financiers clandestins) (TRACFIN) is an entity which receives and analyses information about suspicious activity relating to money laundering or terrorist financing.

TRACFIN receives the reports required of professionals and organisations by Article L561-2 of the Monetary and Financial Code (see Question 19).

TRACFIN can request all exhibits and documents that were retained in relation to a high-risk operation from the professionals and entities mentioned in Article L561-2 (Article L561-26, Monetary and Financial Code).

TRACFIN can also receive and solicit information necessary to achieving its mission from all levels of the French administration and any person holding a public office (Article L561-27, Monetary and Financial Code).

After TRACFIN receives and analyses reports of suspicious activity, it refers the matter to the Public Prosecutor if the facts at hand may constitute an offence that is punishable by more than one year's imprisonment, or if the facts evidence the offence of financing terrorism (Article L561-23, Monetary and Financial Code). TRACFIN does not refer violations of Article 1741 of the General Tax Code for fiscal fraud to the Public Prosecutor.

The ACPR and the National Enforcement Commission are among the bodies responsible for monitoring the compliance of individuals and organisations named in Article L561-2 of the Monetary and Financial Code with their anti-money laundering and anti-terrorist financing obligations, including their obligation to make declarations to TRACFIN under Article L561-15 of the Monetary and Financial Code.

The ACPR monitors compliance with anti-money laundering and terrorist financing obligations of the Caisse des Dépôts et Consignations (the state-owned investment authority charged with investing public funds), credit establishments, investment enterprises and other asset management companies or market operators (Article L561-36, Monetary and Financial Code). The ACPR is made up of a board of supervision, a board of resolution and a sanctions commission (Article L612-4, Monetary and Financial Code):

  • The board of supervision. This examines compliance with anti-money laundering and anti-terrorist financing requirements by reviewing responses to questionnaires as well as through diligent on-site controls.

  • The board of resolution. This is responsible for drafting and implementing measures for the prevention and resolution of banking crises foreseen by articles L613-31-11 to L613-31-17 of the Monetary and Financial Code. The object of the Code is to:

    • preserve financial stability;

    • assure the continuity of activities of services and of operations of establishments whose failure would have grave consequences for the economy;

    • protect deposits or prevent or limit recourse to public support.

  • The sanctions commission. This is a special administrative authority composed of six members (Article L612-9, Monetary and Financial Code). It can take administrative enforcement measures and impose both interim measures and penalties, including disciplinary and pecuniary sanctions. If a professional or organisation subject to the sanctions commission's jurisdiction does not respect anti-money laundering and terrorist financing obligations and exhibits a grave lack of vigilance or a grave violation regarding the organisation of internal control procedures, a disciplinary procedure is undertaken and the Public Prosecutor is notified (Article L561-36-III, Monetary and Financial Code).

  • The National Enforcement Commission monitors compliance with anti-money laundering and terrorist financing obligations of professionals named by sections 8, 9 and 15 of Article L561-2 of the Monetary and Financial Code. It carries out disciplinary procedures following the receipt of a report of non-compliance from the relevant authority (Article L561-41, Monetary and Financial Code). The procedure before the National Enforcement Commission includes notification of the administrative authority's findings to the person concerned, to his central organisation of affiliation, and to the individual's professional association (Article L561-41, Monetary and Financial Code). If a report indicates that a professional subject to the National Enforcement Commission's ambit did not respect anti-money laundering and terrorist financing obligations because of a grave lack of vigilance or a grave violation in relation to organisation of internal control procedures, a disciplinary procedure is undertaken and the Public Prosecutor is notified (Article L561-41, Monetary and Financial Code).

  • Due process (a right to be heard) is guaranteed before both the ACPR and the National Enforcement Commission. Decisions of the ACPR board can be nullified by the Conseil d'Etat. However, decisions of the ACPR sanctions commission are subject to appeal of full jurisdiction before the Conseil d'Etat, which means that the sanction commission's decisions can be reformed and not simply nullified (Article L612-16, Monetary and Financial Code). The National Enforcement Commission must make reasoned decisions, which are subject to an administrative appeal of full jurisdiction and, therefore, can also be modified on appeal (Articles L561-42 and L561-43, Monetary and Financial Code).

Financial/trade sanctions

The Minister of the Economy and Finance or one of its representatives alone has the authority to begin proceedings related to the contravention of legislation and regulations for financial relations abroad (Article 458, Customs Code).

Enforcement of trade and financial sanctions is carried out by (Article 453, Customs Code and Article 28-1, Code of Criminal Procedure):

  • Customs agents.

  • Other agents of financial administration that have at least the grade of controller.

  • Officers of the judicial police.

    These agents can require all public services to produce information that is necessary to their investigative mission and may not be denied information based on professional secrecy rules (Articles 453 to 456, Customs Code).

These agents have the following investigative powers:

  • The right to visit all locations (domiciles and professional locations).

  • The right to require the communication of and seize documents from public services, the French administration, corporations and private individuals.

  • The right to interrogate individuals.

The investigating agents submit their findings to the Minister of the Economy, who then decides whether to make a complaint to the Public Prosecutor (Article 453, Customs Code). An individual suspected of violating a financial or trade sanction may be prosecuted in the civil courts in separate actions by the Public Prosecutor and the administration. The Public Prosecutor can ask for the application of criminal sanctions, while the administration can ask for tax sanctions (Article 343, Customs Code). The Public Prosecutor may, if it so chooses, ask for both tax and criminal sanctions.

 

Penalties

22. What are the penalties for participating in money laundering, terrorist financing offences and/or for breaches of financial/trade sanctions?

A defendant may be subject to civil sanctions for actual damages suffered as a result of the offence. Punitive damages are not available in France, and damages awards are made with a view to making the victim whole or, in the case of "moral damages", to compensate for non-specific damages such as anguish or distress.

The victim of an offence may initiate criminal proceedings as a civil party or may intervene in criminal proceedings to claim damages. A person may be subject to a civil sanction in addition to, or instead of, a criminal investigation.

A defendant may also be subject to fines that must be paid to the French state. These fines are distinct from damages.

Corporations can be held criminally liable when responsible individuals act on their behalf (Article 121-2, Criminal Code). The maximum fine for a corporate entity is five times the fine applicable to individuals (Article 131-38, Criminal Code). Participation in a criminal association is punishable by five years' imprisonment (Article 450-1, Criminal Code).

Money laundering

Requirement to pay a bond. An individual under formal investigation for money laundering may be subject to measures that could restrict his liberty and may be ordered to pay a bond in order to guarantee his appearance in court or to secure the reparation of damages caused by the alleged crime (Article 138, paragraph 11 of the Criminal Procedure Code) (see Question 4).

Penalties. Money laundering is punishable by five years' imprisonment and a fine of EUR375,000.

Money laundering in relation to an individual or collective enterprise with the goal of gravely disturbing public order with intimidation or terror is itself an act of terrorism, punishable by ten years' imprisonment when it is committed intentionally (Article 421-1, Criminal Code).

Terrorist financing

Requirement to pay a bond. An individual under formal investigation for terrorist financing may be subject to measures that could restrict his liberty and may be ordered to pay a bond in order to guarantee his appearance in court or to secure the reparation of damages caused by the alleged crime (Article 138, paragraph 11, Criminal Procedure Code) (see Question 4).

Penalties. Terrorist financing is punishable by ten years' imprisonment and a fine of EUR225,000 (Article 421-5, Criminal Code).

Financial/trade sanctions

Requirement to pay a bond. An individual under formal investigation for financial/trade sanctions may be subject to measures that could restrict his liberty and may be ordered to pay a bond in order to guarantee his appearance in court or to secure the reparation of damages caused by the alleged crime (Article 138, paragraph 11, Criminal Procedure Code) (see Question 4).

Customs Code offences. Customs Code offences are punishable by:

  • Five years' imprisonment.

  • Confiscation of the object of the infraction.

  • Confiscation of the means of transport used for the fraud.

  • Confiscation of the goods or assets that are the direct or indirect product of the offence and a fine equal to, at a minimum, the amount at issue and, at maximum, double the sum of the offence or attempted offence (Article 459, para. 1 and para. 1 bis, Customs Code).

    For details of the Customs Code offences, see Question 19, Financial trade sanctions.

When the objects subject to confiscation cannot be seized or are not presented by the offender or when the budget minister or his representative so requests, the court can order that the offender pay a sum equal to the value of the object (Article 459, para. 2, Customs Code).

Corporations that are found guilty of the offences defined in Article 459 can be subject to a fine as provided for in Article 131-38 of the Criminal Code. Corporations may also be subject to additional penalties set out in Article 131-39 of the Criminal Code. These additional penalties can include the following:

  • Dissolution.

  • Placement for five years under judicial supervision.

  • Public posting of part or all of the decision delivered.

  • Dissemination of the decision in the written press or by any other means of communication to the public through electronic means.

Any person who incites one of the offences under Article 459-1 of the Customs Code, by writing, propaganda, or publicity may be subject to five years' imprisonment and a fine ranging from EUR450 to EUR225,000 (Article 459, para. 3, Customs Code).

Any individual found guilty of violating laws and regulations relating to foreign financial relations is ineligible to work as a stockbroker, elector or elected member of chambers of commerce, of the commercial courts and of the labour courts, as long as that incapacity is not lifted.

Court decisions finding a violation of Article 459 of the Customs Code will be, at the expense of the person found guilty, published in their entirety or via extracts in designated journals.

Offences under the Monetary and Financial Code. A Monetary and Financial Code offence is punished by the penalties provided for in Article 459 of the Customs Code (see above). For further details of the offences, see Question 19, Financial/trade sanctions.

Other. Other banks and other financial institutions may be vulnerable to investigation and prosecution under the laws of other countries. In June 2014, BNP Paribas reached an agreement with US prosecutors and regulators where it made payments totalling US$8.9 billion, and pleaded guilty to a US federal crime. This outcome and Total's large 2013 settlement of US criminal charges under the Foreign Corrupt Practices Act has raised questions on the extra-territorial effect of US criminal laws and enforcement efforts in France.

 

Financial record keeping

23. What are the general requirements for financial record keeping and disclosure?

Commercial entities must (Article L 123-12, Commercial Code):

  • Keep accounting records (in French and in Euros) of all transactions.

  • Carry out at least an annual inventory of the existence and value of their assets.

  • Maintain annual financial statements (including a balance sheet with an annex, a profit and loss statement and an inventory).

The accounting records must be kept as a:

  • Livre-journal (recording transactions in chronological order).

  • Grand livre (a ledger recording the transactions, broken down according to the applicable accounting items).

  • Inventory book.

The livre-journal and the inventory book must be filed with, and certified by, the clerk of the commercial court, or in a specific approved electronic fashion.

The accounting records must be retained, with all supporting documentation (invoices and contracts), for ten years (Article L123-22, Commercial Code). The annual financial statements must be submitted to, and approved by, the shareholders and then filed with the office of the clerk of the commercial court. They are available to the public.

 
24. What are the penalties for failure to keep or disclose accurate financial records?

If accounting records have not been properly kept, the record holder cannot use them as evidence in his defence (Article L123-23, Commercial Code). A criminal fine of EUR9,000 can be imposed on managers.

If the annual financial statements do not provide an accurate image of the company, the company's managers may be subject to a prison term of up to five years and/or a criminal fine of up to EUR375,000 (Articles L242-6 2, L244-1, L241-3 3 and L243-1, Commercial Code). The statutory auditor can be prosecuted for aiding and abetting. In addition, the managers are liable for damages, together with the statutory auditor who did not report the violation when he knew of it. Shareholders who knowingly benefitted from undue dividends must return them.

 
25. Are the financial record keeping rules used to prosecute white-collar crimes?

Financial records and documentation reported to the Ministry of Economics and Finance service against money laundering (TRACFIN) can be referred by it to the Public Prosecutor if they appear to reflect criminal activity (Article 40, Criminal Procedure Code and Article L561-29, Monetary and Financial Code). The Public Prosecutor can then use these records and documentation in its investigation and pursuit of the case.

Compliant financial records are binding on their holders. Any evidence of violation found in properly kept financial records can be used to support corporate offence charges.

Improperly kept financial records may result in a finding that false information has been provided which may distort the price of listed securities. The Financial Markets Authority (AMF) can fine companies that provide false information which may affect the value of a listed security. Such information may also be sanctioned by the criminal court (by two years' imprisonment and a fine of EUR1.5 million) (Article L465-1, Monetary and Financial Code). If the accounting records have not been properly kept or if there are strong reasons to conclude that the financial records are wrong, the tax authorities can disregard them and reassess the taxable basis on an external basis; as a result, the burden of proof is reversed.

 

Due diligence

26. What are the general due diligence requirements and procedures in relation to corruption, fraud or money laundering when contracting with external parties?

General due diligence procedures comprise:

  • Identification of clients.

  • Analysis of the reasons for the transfer of money.

  • Maintaining good knowledge of the business and market.

Market practice is to conduct due diligence in accordance with French law, including laws that protect individuals' right to data privacy. Due diligence standards often require that companies retain information that may be considered "personal data" under the law and, in that context, the person involved must consent to the processing of "personal data".

No official public source identifies businesses subject to criminal or administrative decisions for corruption, fraud or money laundering. Investigations by the Public Prosecutor or a prosecuting judge are subject to confidentiality and third parties cannot access such files. Accordingly, the information is primarily obtained from the other party. Due diligence in respect to such matters is therefore generally limited to:

  • Questions to management.

  • Obtaining copies of communications to and from the French anti-money laundering agency (TRACFIN).

  • Reports on any internal investigations or reviews of issues, practice or procedure.

  • Representations on any court decisions and past investigations.

Certain financial and advisory businesses are subject to particular organisational rules, including the appointment of an anti-money laundering officer and certain anti-corruption internal procedures (Article L561-32 and following, Monetary and Financial Code). The due diligence arrangement may invoke an interview with the appointed money laundering officer and obtaining copies of any internal rules, reports on investigations and tests.

 

Corporate liability

27. Under what circumstances can a corporate body itself be subject to criminal liability?

Corporations (or other legal entities other than the French state) can be held criminally responsible under Article 121-2 of the Criminal Code. Such entities may be found guilty for acts committed on their behalf (or for their benefit) by responsible individuals, described in the Code as "organs" or "representatives" of the corporation.

An "organ" is generally some person or group exercising powers inherent to their position or deriving from a corporation's bye-laws or internal governance. A "representative" is generally someone to whom certain responsibilities have been delegated by the corporation.

A corporation must be shown to have had a requisite level of knowledge and intent under Article 121-3 of the Criminal Code but the threshold may be lower than for an individual.

The establishment of corporate criminal responsibility does not exclude the possibility of individual responsibility for the same act.

A managing director (chef d'entreprise) may be criminally responsible for acts committed within a corporation subject to his supervision, unless there is a specific delegation of authority to someone else in relation to that activity.

 

Cartels

28. Are cartels prohibited in your jurisdiction? How are cartel offences defined? Under what circumstances can a corporate body be subject to criminal liability for cartel offences?

Cartels are prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union and are also prohibited by the French law.

Under Article L420-1 of the Commercial Code, co-ordinated actions, whether they are express or tacit, or coalitions, even when made by a direct or indirect intermediary located outside of France, are prohibited when they tend to do any of the following:

  • Limit access to the market or to the free access to competition by other enterprises.

  • Create an obstacle to the establishment of prices through artificial increases or decreases in prices.

  • Limit or control the production, the outlets, the investments or technical progress.

  • Allocate the markets or the sources of supply (Article L420-1, Commercial Code).

Under Article L420-2 of the Commercial Code, an enterprise or a group of enterprises is prohibited from abusing a dominant position on an internal market or a substantial part of an internal market. The following actions can constitute an abuse of a dominant position:

  • A refusal of sale.

  • Tied sales.

  • Discriminatory sales terms.

  • The breaking of an established commercial relationship for the sole reason that a commercial partner refuses to submit to unjustified commercial terms.

The exploitation by an enterprise or by a group of enterprises of the state of economic dependence with regard to a client or a supplier is also prohibited by the same article (Article L420-2, Commercial Code). Any contract, engagement or clause that relates to a prohibited activity as defined by Article L420-1 or L420-2 of the Commercial Code does not have any effect (Article L420-3, Commercial Code).

Offers of sale prices or consumer prices that are abusively low considering the cost of production, transformation and commercialisation, which aim at or can result in eliminating from a market or preventing the access to a market in respect of an enterprise or one of its products, are also prohibited (Article L420-5, Commercial Code). Cartels, as defined by Articles L420-1 and L420-2 of the Commercial Code, can be prosecuted by the public prosecutor as second level crimes and may be sanctioned as an administrative violation by the Competition Authority. The criminal and administrative system of prosecution is dual-track, which means that an individual or legal entity may be subject to both criminal and administrative prosecution.

Fraudulent participation by an individual or a legal entity in the conception, organisation, or putting into place of a practice that is prohibited by Article L420-1 and L420-2 of the French Commercial Code constitutes a second level infraction (Article L420-6, Commercial Code). The prosecution for this offence may be initiated by the Public Prosecutor or a civil party may. For the Public Prosecutor's powers of investigation, see Question 10. If an individual is convicted for violating Article L420-6 of the Commercial Code, the following sanctions may apply:

  • A fine of EUR75,000.

  • Up to four years of imprisonment.

  • Possible complementary sanctions such as full or partial publication of the court decision at the cost of a convicted individual.

If a legal entity is convicted of a violation of Article L420-6 of the Commercial Code, the sanction may be as high as five times the fine for an individual (EUR375,000) (Article 131-38, Criminal Code).

The Competition Authority can take action when cases are referred to it by the Minister of Economy, by an enterprise or by other organisations such as, for example, professional organisations, unions or consumer organisations (Article 462-5, Commercial Code). When the financial sanction imposed by the Competition Authority and the criminal sanction are cumulative, the sum of the sanctions cannot exceed the maximum amount of the highest sanction (Article L 465-2, VI of the Commercial Code).

The Competition Authority can be consulted on anti-competitive activity as defined by Articles L420-1, L420-2, L420-2-1 and L420-5 of the Commercial Code as well as Articles 101 and 102 of the Treaty on the Functioning of the European Union (Article L462-3, Commercial Code). If the facts of the activity are contrary to the provisions of the Commercial Code and they are not justified by an exception, the Competition Authority can pass sanctions and order injunctions (Article L462-6, Commercial Code). When the Competition Authority believes that the facts of the activity could constitute a second level infraction under Article L420-6 of the Commercial Code, it must notify the public prosecutor (Article L462-6 Commercial Code).

The Competition Authority has broad investigative powers for the enforcement of the prohibition of anti-competitive practices (Article L450-1 of the Commercial Code).

The Competition Authority can, under Article L464-2 of the Commercial Code, take any of the following actions:

  • Order the end of the anti-competitive activity within a fixed period or impose specific conditions.

  • Accept engagements proposed by enterprises or organisations to rectify their obligations.

  • Apply an immediate financial sanction or apply a financial sanction in the event of a breach of an injunction or the engagements that have been accepted.

When the Competition Authority applies financial sanctions, they must be proportionate. The maximum sanction for an individual is EUR3 million and the maximum sanction for an enterprise is 10% of its global profits before the application of tax. The calculation of an enterprise's profit for the purpose of applying the sanction is based on the highest profit that was realised since the closing of a business' accounts, starting from the closing of accounts that preceded the accounting period during which the practices were put into place (Article L464-2, Commercial Code). When a simplified procedure, or a procedure in which a case will be examined without a prior report by the Competition Authority, is used under Article L463-3 of the Commercial Code, the financial sanction cannot exceed EUR750,000 for each individual or entity that engaged in a prohibited activity (Article L464-5, Commercial Code). Final decisions of the Competition Authority may be subject to appeal before the Court of Appeal of Paris within one month from their notification (Article L464-8, Commercial Code).

In urgent situations, the Competition Authority may order conservatory measures, which can include the suspension of the anti-competitive practice in question or an injunction to return to a previous state but must be limited to measures that are strictly necessary to address an urgent situation (Article L464-1, Commercial Code). Conservatory measures may only be ordered if the alleged anti-competitive practice is a grave and immediate threat to the general economy, the affected sector, the interest of the consumers, or to the complaining enterprise. Such measures may only be put into place after the affected parties have had the opportunity to be heard. The Competition Authority's orders for conservatory measures may be appealed before the Court of Appeal of Paris within ten days of their notification to the parties (Article 464-7, Commercial Code).

The Minister of Economy can order enterprises to stop anti-competitive practices that would otherwise be handled by the Competition Authority in the following circumstances:

  • The practice in question affects a local market.

  • The practice does not concern Articles 101 and 102 of the Treaty on the Functioning of the European Union.

  • The profits of the enterprise in question are made in France and do not exceed EUR50 million at the time of the last closing of its accounts. The cumulative profits of the enterprise cannot exceed EUR200 million (Article 464-9, Commercial Code).

 

Immunity and leniency

29. In what circumstances is it possible to obtain immunity/leniency for co-operation with the authorities?

Other than certain limited situations (such as participation in a cartel, where the first company to alert the authorities may avoid prosecution), no formal immunity or leniency is granted to corporations or individuals for co-operation.

While French criminal procedure allows for a conditional guilty plea, there is no procedure or tradition for negotiating such a plea and there are no alternative non-criminal dispositions equivalent to a US "Deferred Prosecution Agreement" or "Non-Prosecution Agreement". The absence of negotiated outcomes in criminal investigations is currently under discussion in France.

 

Cross-border co-operation

30. What international agreements and legal instruments are available for local authorities?

Obtaining evidence

France is a signatory to a number of international agreements providing for co-operation in criminal matters. These include:

  • The HCCH Convention on the Taking of Evidence Abroad in Civil or Commercial Matters 1970, which may apply to non-criminal investigations.

  • Bi-lateral extradition agreements with its trading partners.

  • European conventions relating to extradition from France to other countries in Europe.

  • More specialised agreements such as the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997, which requires co-operation among its signatories.

  • Numerous bi-lateral mutual legal assistance treaties (MLATs) and memoranda of agreement (MOA)with most of its trading partners.

    France has designated a special office of the Ministry of Justice to handle requests made under such treaties. The Ministry of Justice, the Financial Markets Authority (AMF) and other organisations also have practical relationships with their non-French counterparts (such as the US Securities and Exchange Commission). The United States currently posts a federal prosecutor and several agents of the Federal Bureau of Investigation at its Embassy in Paris. Their work includes co-ordinating cross-border co-operation with their French counterparts, with whom they generally have good relations.

Seizing assets

Where no international convention provides otherwise, assets, including funds that are the fruits of criminal activity, can be seized by the police under a court order (Articles 713-36 to 713-41, Code of Criminal Procedure). At the request of the Public Prosecutor, the French authorities may obtain a court order permitting them to seize assets found in France that have been found by a decision of a foreign court to be the fruits of illegal activity elsewhere, if the activity would be criminal if committed in France.

Sharing information

As there is no tradition or any criminal procedures that encourage "self-reporting", prosecutors and regulatory authorities are unlikely to be aware of possible criminal activity due to voluntary disclosure to them by a company that discovers past incidents. However, whistleblowers or their own investigations may reveal possible criminal activity to French authorities.

If the activity relates to possible economic crimes committed by domestic companies or citizens, the French authorities are unlikely to share information with prosecutors or regulators in other jurisdictions. They may share information relating to non-French companies or citizens with jurisdictions capable of investigating them.

 
31. In what circumstance will domestic criminal courts assert extra-territorial jurisdiction?

The territorial application of French criminal provisions is governed by Articles 113-6 to 113-12 of the Criminal Code. French criminal law applies to offences where either:

  • One material element took place on French soil.

  • The perpetrator is a French national or corporation.

  • The victim is French.

The criminal procedures applicable to prosecutions based on acts committed outside of France may be different from the procedures applicable to domestic crimes.

 
32. Does your jurisdiction have any statutes aimed at blocking the assertion of foreign jurisdictions within your territory? Are there statutes aimed at blocking the assertion of foreign jurisdictions within their territory?

France has adopted legislation, commonly known as the Blocking Statute, which makes it a criminal offence for any person to provide information of scientific or commercial value to a foreign investigator or court for use in a non-French judicial or administrative procedure, other than through the exercise of an international agreement.

The National Commission on Databases and Liberty (Commission Nationale de l'Informatique et des Libertés) (CNIL), created in 1978, has rules that prohibit the transfer of certain kinds of data outside of France.

France generally does not extradite its citizens, other than to other countries in the European Union,

 

Whistleblowing

33. Are whistleblowers given statutory protection?

A whistleblower cannot be fired or disciplined for providing accurate information about a criminal offence to an appropriate authority. Individuals so fired or disciplined may have a claim against the company (Article L1132-3-3, Labour Code). There is no "bounty" provision applicable to whistleblowers in France. Companies may post "free call" telephone numbers to permit whistleblowers to contact the company on a confidential basis, but under rules promulgated by the National Commission on Databases and Liberty (CNIL) whistleblowers can only be encouraged to make such calls on specific limited subject matters.

 

Reform, trends and developments

34. Are there any impending developments or proposals for reform?

The Organisation for Economic Co-operation and Development biannual report, issued in October 2012, was critical of France's efforts to combat international corruption in accordance with its obligations under the OECD Convention on Combating Bribery of Foreign Officials. Since then, there has been significant public discussion about reforming French criminal procedures in relation to international crime but no formal proposals have yet been made.

The Total and BNP Paribas settlements (see Question 22, Financial/trade sanctions) have highlighted areas where French investigative and prosecutorial activities are behind those of other countries. An interministerial group devoted to preventing corruption in France (Service Central de la Prévention de la Corruption) has indicated that by the end of 2015 it will propose new legislation to facilitate more effective French efforts in the area of overseas corruption, including the possibility of negotiated outcomes, which are now essentially impossible in France.

 

Market practice

35. What are the main steps foreign and local companies are taking to manage their exposure to corruption/corporate crime?

Although compliance programmes are less established in France than in the UK or US, and generally are not relied on to seek a non-criminal disposition such as a Non-Prosecution or a Deferred Prosecution Agreement, there is an increased emphasis in France on the value of a strong compliance programme. A number of large French companies have established a "chief of compliance" function, often with a reporting line independent of the chief legal officer.

 

The authorities

Public Prosecutor

Status. Public Prosecutors are trained as judges and elect to act as prosecutors. They can move between prosecutorial and trial roles during their careers. They are not considered "lawyers" in the sense of being members of a local bar.

Principal responsibilities. The Public Prosecutor, working with police agencies investigates criminal activity arising under the Criminal Code and other criminal laws.

The office of the prosecutor includes a chief prosecutor or procureur de la République assisted by deputy prosecutors (avocats généraux) and assistant prosecutors (substituts). The chief prosecutor generally initiates preliminary investigations and, if necessary, asks that an Investigating Magistrate (juge d'instruction) be assigned to lead a formal judicial investigation. During criminal proceedings, prosecutors are responsible for presenting the case at trial to either the bench or (for matters punishable by more than ten years' imprisonment) a jury. They suggest advisory sentencing guidelines, but it remains at the court's discretion to determine its own sentence.

Investigating Magistrate

Status. An Investigating Magistrate is a judge who has received judicial training at the National Judges School in Bordeaux. Judges are not considered "lawyers" and are not members of a Bar. Certain crimes require an investigation (instruction) by an Investigating Magistrate.

Principal responsibilities. An Investigating Magistrate acts on the facts that have been given to him by the Public Prosecutors and is formally mandated to seek all information in order to establish the facts of the case, including both exculpatory as well as incriminating evidence.. The Investigating Magistrate has a wide array of investigating powers, including:

  • Authorising "dawn raids" by the police of premises likely to contain information.

  • Authorising wiretaps.

  • Interrogating witnesses pursuant to "garde à vue", by which a witness may be kept in custody for 24 hours for questioning (subject to several renewal periods of 24 hours, and up to a maximum of 120 hours for persons suspected of terrorism) either by the Investigating Magistrate or the police.

The results of the investigation are maintained in a formal file, which subjects of the investigation can access once they are put under formal investigation. Upon completion of the investigation, after obtaining the views of the Public Prosecutor and subjects put under formal investigation, the Investigating Magistrate decides whether to bind the subject of the investigation over to trial, describing the charges for which sufficient evidence has been found to merit a trial.

Financial Markets Authority (Autorité des Marchés Financiers) (AMF)

W www.amf-france.org

Status. Independent public body.

Principal responsibilities. The AMF's main responsibilities include:

  • Safeguarding investments in financial instruments and in all other savings and investment vehicles.
  • Ensuring that investors receive material information.
  • Maintaining orderly financial markets.
  • Investigating, judging and imposing administrative sanctions (fines) against financial market violations.

Prudential Control and Resolution Authority (Autorité de Contrôle Prudentiel et de Résolution) (ACPR)

W www.acpr.banque-france.fr

Status. Independent public body.

Principal responsibilities. ACPR's principal responsibilities are to:

  • Contribute to the stability of the financial sector.
  • Protect customers.
  • Strengthen French influence on the international and European financial markets.

Ministry of Economics and Finance Service against Money Laundering (TRACFIN) (Traitement du Renseignement et Action Contre les Circuits Financiers Clandestins)

W www.economie.gouv.fr/tracfin/accueil-tracfin

Status. Public body attached to the Ministry of Economics and Finance.

Principal responsibilities. TRACFIN is the Ministry of Finance service that works against money laundering. It receives reports of money laundering from individuals.

TRACFIN analyses the information contained in these reports and may investigate further if necessary.

If TRACFIN suspects that a transaction is illegal, it transfers the files to the Public Prosecutor's office.

National Enforcement Commission (Commission Nationale des Sanctions)

W www.tresor.economie.gouv.fr/3826_commission-nationale-des-sanctions

Status. Public body attached to the Ministry of Economics and Finance.

Principal responsibilities. The National Enforcement Committee can impose sanctions for money laundering and terrorist financing against professionals working in sectors that are not organised under independent governing bodies, including, for example:

  • Real estate professionals.
  • Casino managers and gambling groupings, circles and companies.
  • Persons operating tax-related domiciliation services.


Online resources

Legifrance

W www.legifrance.gouv.fr

English translations available at www.legifrance.gouv.fr/Traductions/en-English

Description. Official updated portal for law resources in France (statute, case law, convention, and so on). Translations are available on the Legifrance website for principal codes but these translated texts are for reference only and have no legal force.

Cour de cassation

W www.courdecassation.fr

Description. French Supreme Court official website.

Unofficial English translations of French jurisprudence are available on the website of the University of Texas at Austin.

University of Texas at Austin

W www.utexas.edu/law/academics/centers/transnational/work_new/

Description. Unofficial English translations of French jurisprudence are available on the website of the University of Texas at Austin.



Contributor profiles

Antoine Kirry, Partner

Debevoise & Plimpton LLP

T +33 1 40 73 12 12
F +33 1 47 20 50 82
E akirry@debevoise.com
W www.debevoise.com

Professional qualifications. Admitted to the Bar: New York and Paris

Areas of practice. International arbitration; criminal, regulatory and civil litigation; investigations involving US and French laws.

Recent transactions

  • Extensive experience in criminal and investigative investigations, as well as complex litigation, in France.
  • The successful defence of a French bank on appeal of a judgment that had found the bank liable for negligence in providing investment advice (judgment reversed).
  • The successful defence of one of the individual defendants in the EADS insider trading case.
  • Advising a US Fortune 500 company in a US$200 million contract dispute against a French CAC 40 company.
  • Advising a leading Australian financial institution in the resolution of a dispute over a shareholders' agreement relating to a French listed company.

Publications

  • "La responsabilité des dirigeants: quelle protection?" (with Marie-Christine Monsalier-Saint Mleux), La Semaine Juridique, March 2009

  • "Recapitalisations Are Attractive But Can Bite Back", Private Equity News, May, 2005.

Frederick T Davis, Of Counsel

Debevoise & Plimpton LLP

T +33 1 40 73 12 12
F +33 1 47 20 50 82
E ftdavis@debevoise.com
W www.debevoise.com

Professional qualifications. Admitted to the Bar: New York and Paris

Areas of practice. Criminal, regulatory and civil litigation; investigations involving US and French laws.

  • Served as an Assistant United States Attorney in the Southern District of New York and in private practice in New York before moving to Paris, where he appears in French courts.
  • Successful defence of a US hi-tech company investigated in France under the UN Oil-for-Food programme.
  • Representation of a UK national in a cross-border investigation involving tax fraud (ongoing).
  • Representation of a US construction company in French criminal investigation involving tax matters.
  • Representation of a US industrial company in French criminal investigation involving negligent homicide (now on appeal).

Professional associations/memberships. An elected Fellow of the American College of Trial Lawyers. The French government named him a Chevalier of the National Order of Merit of France. He is a recipient of the Thurgood Marshall Award of the New York City Bar Association. He taught a full academic course at Harvard Law School as the Nomura Lecturer on International Law.

Publications

  • Co-author of the France chapter in "The Internal Investigations Review", part of The Law Reviews series published by Law Business Research, Third Edition (2013).

  • Co-author of "The Foreign Corrupt Practices Act", published in Business and Commercial Litigation in Federal Courts, Third Edition (2011).


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